ACC 221 1st Edition Lecture 29Outline of Previous Lecture- Section 28: Chapter 7 & 8 Review Chapter 7o Value & Depreciation Chapter 8o Removing Assetso Goodwillo Payrollo Sales TaxOutline of Current Lecture - Section 29: Bonds Cont. Bond Liability Face Valueo Discount Bonds o Premium Bondso Par Bondso Maturity Paymentso Semiannual InterestCurrent Lecture- Section 29: Bonds Cont. Bond Liability face valueo Discount bonds Sold $290,000, 6% annual rate, less than face value Amortization schedule - Face value (interest rate) = $17,400- Payment promised in bond agreement = $15,000o Actual – promised = $2,400o Add difference to bond liability Pay $15,000 now, save extra $2,400 for last payment Record payment- Dr. interest expense $17,400- Cr. Cash $15,000- Cr Bond payable $2,400These notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute. End of terms, liability = face valueo Premium Bond Bond liability $310,000; above face value, 4% annual interest rate- $310,000 (4%) = $12,400- Payment promised in bond agreement = $15,000o Actual – promised = $2,600o Add difference to bond liability Pay $15,000 now, reduce bond payable by $2,600 Record payment- Dr. interest expense $12,400- Dr. Bond payable $2,600- Cr. Cash $15,000o By end of term, liability = face value of $300,000o Par Bond Sold $300,000, liability = face value $300,000 (interest rate) = amount originally promised in bond agreement- All payments will be exactly $15,000, and there is no adjusting to get liabilities = face value of $300,000 by end of term Record payment- Dr. bond payable $300,000- Cr. Cash $300,000o Maturity payments Pay off bond payable with cash Will equal face amount of bond after amortization schedule- Dr. bond payable (face value, $300,000)- Cr. Cash (face value, $300,000) Amount paid – amount borrowed = actual interesto Semiannual interest $300,000 at 10% over 2 years $300,000 face value, 5% over 4 payments- $300,000 (5%) = $15,000 Rest of actions same as other amortizations- Stated interest rate / 2- Term (2)- Effective rate /
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